By Stanley Epstein - Principal Associate, Citadel Advantage -
The term ‘Digital Banking’ is, to my mind, one of the most
miss-understood concepts in the financial world today. Ask any group of 21st
century bankers and you will get more definitions than there are member of the
group. And this confusion of definition is one of the reasons why there a lack
of fire and enthusiasm for the whole idea.
Many simply see Digital Banking as mobile banking or on-line
banking. They see it as an add-on to existing and traditional banking services.
All of these are too narrow focused. They fail to see the big picture.
How do I define “Digital Banking”?
Well, I have agonized over this for a while now, in part
because I have been seeking a simple, succinct turn of phrase, ten or twelve
words crafted into a killer definition. But even this eludes me.
My best shot at this is;
Digital Banking is the application of technology to ensure
seamless end-to-end (STP in the ‘old’ jargon) processing of banking
transactions/operations; initiated by the client, ensuring maximum utility; to
the client in terms of availability, usefulness and cost; to the bank in terms
of reduced operating costs, zero errors and enhanced services.
Just for a moment I would like to expand on the benefits, to
both the bank and the client, just to try to illustrate a larger reality, the
way that I see digital banking.
Benefits to the bank:
- Lower operating costs through;
- the elimination of costly
back-office processing operations,
-
fewer (or ideally no)
errors,
-
smaller branch footprint
(the typical branch can become a kiosk affair, providing technology interfaces
for the client to use plus the ability to deal with banking specialists via a
video link) – a minimum number of actual staff will be required.
-
concentrating
banking/business specialists in a single centre, who are then available to
clients via a technology link (either on their mobile, pc or via a kiosk
branch).
Operating cost savings of between
20% to 40% could be achieved this way, according to industry experts. Cutting
costs has the opposite effect on profits – they go up.
·
- Dumping legacy systems;
-
Make no mistake - one of
the biggest drawbacks to going ‘Digital’ is this irrational clinging to legacy
systems (developed in the 1960s and 1970s) that hold progress back. Banks plead
the huge cost of making the change. They are wrong. The ultimate costs of not
making the change are far greater.
Benefits to the customer:
- Improved services and product offerings;
-
24/7 bank services and
availability through your mobile, pc or kiosk branch,
-
‘smart banking’
applications that allow ALL transactions to be completed from the device of
your choice, from beginning to end (with clear instructions and fail safe
mechanisms),
-
access to a FULL range of
services (savings, investments, insurance, loans, mortgages, foreign currency,
etc.),
-
new useful client services
such as warnings, notifications, budgeting, expenditure analyses, savings
programs, calculators (you name it – the range is endless),
- Lower charges (and therefore cheaper banking),
- Banking that meets the client’s needs (not the banks).
Of course with all this data available banks should not
hesitate to follow up on what their client is doing or looking at – by e-mail,
on-line chat, personal phone call. Just like the popular hotel grading system ‘Trip
Adviser’ does today. If you’ve been checking out hotels – they follow up in
days with a ‘Are you still interested in hotels in ….?’
However, somewhere along the way the concept is just simply
getting lost to many bankers. To put it in simple terms, after a promising
start, a digital application for a banking product or service comes crashing
out of the digital world, spiraling down as just another piece of paper to be
handled in just the same way as it has been done in the past. The illusion
vanishes; the bubble bursts; the concept is dead. And we remain trapped in the
same old inefficient, disjointed and highly expensive manual processing routine
of the past.
Some banks are getting it right though and for those still
on the shelf it is going to be one hell of an uphill struggle to catch up when
the penny (or the pound) finally drops.
To my mind the concept of the ‘Digital Bank’ is vibrant,
alive and exciting. It points the way to a future where banks can really add
value and where customers can secure huge benefits in terms of bank products
and services that are really, really useful.